By Katherine Dunn and Stephanie Yang

Gold prices bounced from a 10-month low Friday, as the decline prompted investors to cover short positions and look for bargains.

Gold for February delivery was recently up 0.3% at $1,133.10 a troy ounce on the Comex division of the New York Mercantile Exchange.

The precious metal fell to the lowest level since February on Thursday, after the Federal Reserve announced its decision to raise interest rates by a quarter of a percentage point.

As the market came to expect an interest-rate increase at the central bank's December meeting, investors placed more bearish bets on gold, said George Gero, managing director at RBC Wealth Management.

"Basically what we have is traders standing aside, taking positions off for the weekend," Mr. Gero said.

Gold doesn't pay interest, unlike many other investments, and so demand typically falters when rates rise and other instruments become more attractive. While analysts warned ahead of the rate increase that the impact on gold was largely priced into the market, the Fed also upped expectations for further rate increases in 2017.

Anticipation of three rate increases in the coming year, rather than two, could increase pressure on the metal, said Joni Teves, a strategist at UBS.

"In order for gold to recover, there needs to be a catalyst for markets to pare back current optimism and retrace the recent moves in [interest] rates and the U.S. dollar," Ms. Teves said.

Write to Katherine Dunn at Katherine.Dunn@wsj.com and Stephanie Yang at stephanie.yang@wsj.com

(END) Dow Jones Newswires

December 16, 2016 10:48 ET (15:48 GMT)

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